Investors are waiting to see where Tesla will get an estimated 25,000 tonnes of lithium hydroxide per year to build 500,000 electric vehicles per year by 2018.

Momentum continues unabated in the lithium space as the race heats up to supply the expanding lithium-ion battery sector, which is expected to drive demand in the coming years.

All eyes remain on Tesla Motors (NASDAQ: TSLA) as investors watch to see where the US electric vehicle maker gets the raw material (lithium, graphite, cobalt, nickel and other metals) it needs to support the production of battery packs at a Nevada “gigafactory’ that it is building with partner Panasonic Corp.

Click to download your free report

The Chilean government declared lithium to be a strategic material years ago and its National Lithium Commission continues to struggle with policy issues related to the status of both existing and future licenses to harvest lithium, Hykawy said.

With respect to grade, the hard rock (spodumene) Greenbushes mine in Australia, now owned by Sichuan Tianqi and Albemarle (NYSE:ALB), is the source of the majority of lithium currently produced each year. But few deposits of lithium-bearing minerals can match the high-grade ore that is available at Greenbushes.

Tesla’s lithium consumption today is probably no more than 2,500 tonnes of LCE or just 1.5 percent of global consumption, says a research report by Macquarie Capital (Europe Ltd.)

However, if and when the company reaches its 500,000 unit electric vehicle sales target, Tesla’s auto division alone will account for the equivalent of 16 percent of global lithium consumption in 2015, Macquarie said.

Hykawy has said he doubts that incumbent producers will be able to meet the expected growth in demand on their own without the help of companies in the junior mining sector.

Securities Disclosure: I, Peter Kennedy, hold no direct investment interest in any company mentioned in this article.

Get the Latest Lithium Investing Stock Information

Get the latest information about companies associated with Lithium Investing delivered directly to your inbox.

“Tesla has already signed offtake agreements with two Canadian companies who are hoping to produce lithium in the future. Both are still years away from being in production.” This is not the case for Canada Lithium located in LaCorne, Quebec. The mill is completed and ready for production. But is it considered a ‘chinese’ mine?

Over and above Canadian supply ( doubtfu) , FMC hydroxide is another likely source as FMC announced expansion of 3x production i.e 30,000 tons hydroxide. At this point and time everything is in the air. Namaska, Neo metals (Ganfeng), FMC, SQM, Albemarle, all are potential suppliers of Hydroxide and Carbonate to battery manufacturing of Tesla in next two to three years time. Reality is to see who is likely successful in making volumes as they have
Committed and publicized.